August 26, 2021

“It is unlikely that Jay Powell will set out clear tapering plans in tomorrow’s Jackson Hole Symposium, but a confident tone could support the dollar uptrend. The risk outlook has benefitted from the FDA’s full Pfizer approval earlier this week, although the global Delta variant trend is keeping market participants nervous.”

Tim Hallinan, Trading Director

Main Headlines

US Covid-19 hospitalizations have surpassed 100,000 for the first time since January, nearly doubling since the start of August. The figure remains below the country’s winter peak but hospitals in some parts of the US are straining under the load, and officials in states including Georgia, Kentucky, Tennessee and Idaho have requested extra personnel and resources. The number of patients in hospital beds with confirmed and suspected Covid-19 cases hit 100,517 on Tuesday, according to the US Department of Health and Human Services. That is up from 53,529 on 1 August.

UK business leaders stepped up calls for the government to help fix worker shortages that have resulted in empty supermarket shelves by warning of increased disruption in the run-up to Christmas. A shortage of lorry drivers partly unleashed by post-Brexit immigration rules has hit supplies to supermarkets and other retailers, and the problems have been magnified by some food manufacturers and warehouse operators lacking sufficient staff. Companies ranging from Iceland and Tesco to Suntory, Britvic and Greggs are among the many businesses contending with major disruption.

GBP

Sterling is weaker versus most major currencies this morning. Britain’s most expensive infrastructure project — the HS2 high-speed railway between London and the north of England — is set to be radically scaled back, as the Treasury attempts to control public spending that has ballooned during the Covid crisis. The eastern leg of HS2, linking Birmingham with Leeds, is expected to be curtailed or mothballed. Lord Grimstone, Britain’s investment minister, insisted the UK is not becoming more protectionist, arguing that Chinese investment was welcome provided it is “to our advantage” and defending the private equity industry targeting British companies.

EUR

The euro is stronger against the pound and weaker against the dollar overnight. The European Union will discuss on Thursday whether to reimpose curbs on visitors from the U.S. as new coronavirus cases soar. The change was recommended by Slovenia, which holds the EU’s rotating presidency and is responsible for triggering an assessment of countries allowed non-essential travel there. The European Central Bank is prepared to respond to any market disruptions that may arise when the Federal Reserve starts to unwind monetary stimulus, ECB Chief Economist Philip Lane said in an interview.

USD

The dollar is higher against most majors in the early morning trade. Joe Biden hosted executives from major technology, financial and energy companies on Wednesday for a summit on national cybersecurity, calling the issue “the core national security challenge we are facing.” Investors in the US have started to cut their use of leverage for the first time since the pandemic began, removing some of the borrowed money that has since fuelled a rally in stocks. Air Lines said it would start charging unvaccinated employees enrolled in its healthcare plan an additional $200 a month, becoming the latest US company to compel workers to get the Covid-19 jab.

Markets

MSCI Inc.’s Asia-Pacific gauge snapped a three-day rally, with Chinese tech names slumping on disappointing earnings and Beijing’s crackdown on private industries. South Korean shares dipped after the nation became the first major Asian economy to raise interest rates since the onset of the pandemic. US equity futures declined following another record close for the S&P 500 and Nasdaq 100. European contracts were also lower. The 10-year U.S. Treasury yield held an advance.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: Denmark July Retail Sales

8:00 a.m.: Germany Sept. Gfk Consumer Confidence

8:45 a.m.: France Aug. Manufacturing Confidence

9:00 a.m.: ECB’s Rehn Speaks

9:30 a.m.: Sweden July PPI, Household Lending

10:00 a.m.: Euro-area July Money Supply

11:00 a.m.: Italy to sell bills

1:30 p.m.: ECB minutes

2:00 p.m.: Jackson Hole virtual symposium agenda available

3:00 p.m.: Sweden Finance Minister Andersson presents forecasts

4:10 p.m.: ECB’s Villeroy speaks in Paris

5:00 p.m.: ECB’s Schnabel speaks at roundtable

Biden and Bennett meet at White House

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